Recent H-share listing Bank of Qingdao sees pretax profit jump 19.9 per cent
But return on average equity dips 2.88 percentage points
Mainland city commercial bank Bank of Qingdao says its level of non-performing loans climbed by 0.05 of a percentage point to 1.19 per cent last year, and its net interest margin on loans has dipped 0.07 of a percentage point to 2.36 per cent.
In its 2015 results briefing on Thursday, just over three months since its H-share debut in Hong Kong, the bank also said a key indicator of its efficiency in using new capital to generate profits – return on average equity – dipped 2.88 percentage points to 13.74 per cent last year from the 2014 figure shown to clients during its pitching period.
Backed by new cash raised from clients, Bank of Qingdao aggressively expanded its balance sheet and pushed out new loans to the local economy. The bank saw its total assets rise 19.9 per cent to 187.2 billion yuan (HK$223 billion) last year. Its loan book grew by 15.7 billion yuan, a 15.4 per cent increase, to 72.7 billion yuan, while growth in customer deposits fell to 13.4 per cent.
Its pretax profit rose 19.9 per cent to 2.3 billion yuan.
The bank’s loan book is dominated by business with local companies, accounting to 72.7 per cent of the total, with 35.1 per cent of its corporate exposure to clients in manufacturing, 14.3 per cent to wholesale and retail businesses, and 12.1 per cent to construction clients.
Xiamen University’s macroeconomic research unit predicts Qingdao’s gross domestic product growth will slow to 6.6 per cent this year, from 6.9 per cent last year.
Its home base of Shandong province has the third-largest provincial economy in mainland China but GDP growth has declined for 10 consecutive years, despite being a popular hub for outsourcing technology, services and manufacturing to Korean and Japanese clients just across the Yellow Sea.
Bank vice-president and executive director Yang Fengjiang declined to say whether he believed its level of non-performing loans had peaked last year.
“Retail NPL has peaked … retail business is a key bank strategy,” he said. “Since 2015 we are focusing more resources on this area.”
In its corporate lending, which forms the bulk of its business, it says it is keen to lend in policy-supported areas that benefit social progress, environmental technology and the central government’s “one belt, one road” initiative.
On another growth theme, board secretary Lu Lan outlined its “interface bank” strategy, in which it has teamed up with key companies such as Coca Cola and the local metro operator to develop payment systems for the partners’ end clients. Lu said the bank had acquired a new client base with Coke franchisees and had issued some 320,000 metro cards.
Liu Peng, the bank’s director of market business, said wealth management product sales had grown by 40 per cent to 50 per cent.
“The growth will stay on trend this year,” Liu said without offering further details of the bank’s wealth management product exposure.
The bulk of Bank of Qingdao shares went to a handful of institutional investors in the bank’s late November initial public offering, in which the bank priced its shares at just 0.87 times price to book and raised HK$4.65 billion.
Exchange records showed mainland white goods manufacturer Haier raised its stake to 35.38 per cent in January. The Qingdao municipal government’s investment arm, Qingdao Conson Industrial, now controls 21.93 per cent.
Bank of Qingdao shares rose 1.03 per cent to HK$4.90 in Hong Kong on Thursday.